Former EDC staffers sue to block proposed 38 Studios settlement

PROVIDENCE, R.I. -- Two former employees of the R.I. Economic Development Corporation on Monday formally objected to a proposed settlement in the long-running 38 Studios civil case.

Paul Grimaldi Journal Staff Writer paulegrimaldi

PROVIDENCE, R.I. -- Two former employees of the R.I. Economic Development Corporation on Monday formally objected to a proposed settlement in the long-running 38 Studios civil case.

Keith Stokes, who served as executive director of the EDC, and J. Michael Saul, who served as its deputy director, have asked a R.I. Superior Court judge to block the settlement.

The EDC sued 14 individuals, law firms and financial institutions in Superior Court in November 2012, a few months after the video-game company founded by ex-ballplayer Curt Schilling filed for bankruptcy.

The agency -- now known as the R.I. Commerce Corporation -- seeks money to help cover the costs of the $75-million bond sale that raised money for 38 Studios' operation in Rhode Island.

One of the lawyers who advised the EDC on its ill-advised loan guaranty to 38 Studios has reached a tentative settlement with the agency.

Antonio Afonso and his firm -- Moses Afonso Ryan Ltd. -- have agreed to pay $4.37 million from the law firm's insurance policy "to put this matter behind them," according to state court documents. Afonso served as bond counsel to the EDC on the deal.

Stokes and Saul, co-defendants in the case along with Afonso, assert in court papers that the recently approved Rhode Island law that opened the way for such individual settlements is unconstitutional. They've asked Superior Court Judge Michael A. Silverstein to block the settlement.

Introduced in the spring at the request of Governor Chafee's administration, the proposal effectively shields any defendant that settles with the state in the case from lawsuits brought by other defendants over damages for which that defendant is found liable.

The law is "fundamentally unfair," Stokes and Saul assert, because they cannot rely on the insurance policies available to Afonso and other lawyers to pay legal costs such as the proposed settlement.

Silverstein is expected to consider the settlement matter Tuesday during a court hearing in Providence.